The Right Questions about Reverse Mortgages
You may be like most consumers. You've heard about Reverse Mortgages but are unsure and want more information.
Your situation may be the right fit for a Reverse Mortgage so it is important that you take the time to learn more. What questions do you ask? Here is a guide to some smart and basic questions and answers that will provide you a good overview of the Reverse Mortgage program.
What is a Reverse Mortgage?
A Reverse Mortgage is a government insured loan that allows homeowners 62 and older to access the equity in their homes without taking on the burden of monthly mortgage payments. Instead of making payments*, homeowners can receive monthly payments, take cash out, or access the funds from a credit line as needed. It can also be used to pay off an existing mortgage or purchase a home. The most unique feature of a Reverse Mortgage is that it does not have to be repaid until the last surviving borrower moves out of the home permanently*.
How do you qualify?
Borrowers must be 62 or older and own a home with some equity. The amount of equity that is needed will depend on your age, home value, and the current interest rates. There are no credit score requirements and typically no income qualifications**. All liens and/or federal judgments would need to be paid off at closing.
How can I use the funds?
The money from a Reverse Mortgage can be used for any purpose, from making ends meet to living retirement dreams. The top reasons for funds used given typically by borrowers are:
- Paying off debts, primarily mortgage and credit cards
- Home repairs and remodeling
- Living expenses
- Travel
- Health care or long-term care
- Easing the financial burden on children
- Education
- Hobbies
Will you lose your home?
Absolutely not. You remain the homeowner and you can stay in your home for as long as you pay the taxes, insurance, and maintain proper upkeep of the home. In effect, you are being paid to live at home. The program is regulated and insured by the Federal Housing Administration. By law, you can't be forced to sell or move. And no payments are due on the Reverse Mortgage until you no longer live in your home.
If no monthly payments are required, how is the Reverse Mortgage paid back?
This isn't a home equity loan. The loan is paid back when you move out of the home, sell it or all the people on the title have passed away.
What if you want to leave the home to your kids?
It's your home. You can still leave it to your children or to anyone you choose. Your heirs can pay off the loan any number of ways, such as selling the home, refinancing the debt or using other funds to pay off the Reverse Mortgage.
How much cash can you get?
The amount depends on your date of birth, value of your home, fha limits, and the current interest rates.
What are the costs?
As with any loan, there are closing and other costs, most of which can be paid with the money generated by the Reverse Mortgage. Typically the only costs that are collected upfront are the appraisal and counseling fees.
Will this loan affect your Social Security or Medicare benefits?
HECM payments do not affect Social Security or Medicare benefits because those benefits are not based on the assets of the recipient. However, in the federal Supplemental Security Income program, beneficiaries must keep their liquid resources under certain limits.
This is only just the beginning. If you want to explore further, you should schedule a consultation with a knowledgeable and experienced Reverse Mortgage advisor. You are encouraged to consult with family or a financial advisor too. If you have further questions, you are welcome to contact us at reversemortgage@apmortgage.com or call (888) 473-8684.
*Borrowers are responsible for paying property taxes/insurance and maintaining proper upkeep of the property
**Some income qualifications may apply.
